Can the $8,000 tax credit now be used for the FHA down payment? City of Chico Mortgage Subsidy News.
The
short answer is no! Many lenders, thus realtors, interpreted the new FHA
guideline to allow borrowers to monetize their future $8,000 first time home
buyer tax credit for their 3.5% minimum down payment. THIS IS NOT THE
CASE! The new guideline allows them to use their $8,000 tax credit for
FURTHER down payment (on top of the 3.5% down payment) or for closing
costs. Thus making the new guideline worthless in my opinion. Why
worthless? Most, nearly all, FHA first time buyers would rather have a
seller credit covering their closing costs and actually get $8,000 in cash
after closing as opposed to using it for a larger down payment or closing
costs. Remember, gift funds from family can still be used for down
payment funds. Many of my first time home buyers are still getting into
their first home with no money out of their pockets. They are getting a
gift from mom and dad for the down payment, a seller credit for closing
costs, and then choosing to pay mom and dad’s gift back with their $8,000 tax
credit (that they can receive shortly after closing by amending their 2008 tax
returns).
Is
back in action! The city will be accepting new submissions as of July 1st.
The city has changed the amount of subsidy they will be providing to first time
home buyers this time around. Instead of a monetary amount, the subsidy
will be based upon a percentage of purchase price according to the borrowers
income level. Almost everything else has stayed the same. If you or
any of your clients have any questions about the subsidy please give me a
call. I have been using the city subsidy with buyers since 2004.
Most potential buyers meet the income guidelines to qualify for the subsidy
program, BUT it is another thing meeting the city’s debt to income ratios
(which are different than FHA guidelines) to use the subsidy in conjunction
with an FHA mortgage.
Article Written By Ari Gagne at Access Lending in Chico
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